Stephen Bainbridge's Journal of Law, Religion, Politics, and Culture

12/19/2011

Delaware approves $285 Million in Plaintiffs' Lawyers’ Fees

Last year there was some talk that Delaware was losing cases. Specifically, a paper by John Armour, Bernard Black and Brian Cheffins claimed that:

... over the past decade the proportion of corporate suits involving Delaware public companies filed in Delaware has dropped markedly and that Delaware courts now hear only a minority, perhaps a small minority, of the cases involving such firms. Because Delaware is losing its cases, it is in danger of losing its status as the dominant locus for corporate law for U.S. public companies. However, it will be difficult for Delaware courts to execute a successful rearguard action to recapture "market share".

I couldn't help but hearken back to that discussion today when I read the WSJ law Blog's post about Delaware Chancellor Leo Strine's decision approving legal fees in the Grupo Mexico litigation:

In the lawsuit, shareholders of Southern Copper alleged the company overpaid in its 2005 acquisition of Minera Mexico for $3.75 billion in stock. Both were controlled by Grupo Mexico.

Leo Strine, the chief judge of the Chancery Court, agreed and in October ordered Grupo to repay southern $1.9 billion. Strine’s approval today of the $285 million in fees means that Kessler, Topaz, Meltzer & Check of Radnor, Pa., and Prickett, Jones & Elliott, of Wilmington, Del., will get paid about $35,000 per hour of work on the case, according to Reuters.

The firms had requested $428.2 million in fees. The defense attorneys argued for fees of less than $14 million.

The award ranks among the largest in securities litigation, and according to Reuters is believed to be the largest ever by the Chancery Court, which is a high-traffic area for commercial litigation.

I'm confident Strine ruled on the merits, but I'm also confident there are a lot of folks in Delaware who are happily expecting this decision to encourage plaintiffs to come back to Delaware. As Jonathan Macey and Geoffrey Miller have explained:

The members of the Delaware Supreme Court are drawn predominantly from firms that represent corporations registered in Delaware. The bar and the judiciary are tied together through an intricate web of personal and professional contacts. Unlike Professor Cary, we do not suppose that Delaware judges consciously formulate legal rules designed to increase revenues for their former colleagues. We doubt that they have such cynical motives. Yet, it is unsurprising that Delaware judges believe strongly in the efficacy of the Delaware legal system or that such judges often agree with the legislature that firms will be better off if Delaware corporate lawyers play an active role in their affairs. In other words, in Delaware well-intentioned judges can be expected to devise legal rules requiring that Delaware lawyers be consulted when important decisions are to be made. Moreover, if Delaware judges believe that the state judicial system well serves Delaware corporations, they will be more likely to approve rules that stimulate litigation in the Delaware courts.

To put it another way, Francis Pileggi noted of this case that "Someone got an early Christmas gift." But maybe it was the Delaware bench and bar that did so too.

Update: Alison Frankel discusses the case and the fee calculation at some length, before noting that:

Strine's ruling comes with a very particular context. Delaware, according to some recent academic research, has been losing cases to other venues because plaintiffs' lawyers perceive the Chancery Court as an unfriendly jurisdiction. Strine lashed out at ... lawyers who file cases against Delaware corporations outside of Delaware of engaging in "forum shopping of the rankest kind." He particularly called out Stuart Grant of Grant & Eisenhofer, who criticized the Chancery Court despite receiving his own handsome fees. "Delaware is open for business," Strine said at the November conference, repeating one of his favorite catchphrases.

Monday's hearing on the Southern Peru fee request made it clear that the chancellor wants a certain kind of (legal) business to remain in Delaware. .... If lawyers are willing to litigate big cases through discovery and trial, he suggested, Delaware will make sure they're well compensated for their efforts.

Comments

Last year there was some talk that Delaware was losing cases. Specifically, a paper by John Armour, Bernard Black and Brian Cheffins claimed that:

... over the past decade the proportion of corporate suits involving Delaware public companies filed in Delaware has dropped markedly and that Delaware courts now hear only a minority, perhaps a small minority, of the cases involving such firms. Because Delaware is losing its cases, it is in danger of losing its status as the dominant locus for corporate law for U.S. public companies. However, it will be difficult for Delaware courts to execute a successful rearguard action to recapture "market share".

I couldn't help but hearken back to that discussion today when I read the WSJ law Blog's post about Delaware Chancellor Leo Strine's decision approving legal fees in the Grupo Mexico litigation:

In the lawsuit, shareholders of Southern Copper alleged the company overpaid in its 2005 acquisition of Minera Mexico for $3.75 billion in stock. Both were controlled by Grupo Mexico.

Leo Strine, the chief judge of the Chancery Court, agreed and in October ordered Grupo to repay southern $1.9 billion. Strine’s approval today of the $285 million in fees means that Kessler, Topaz, Meltzer & Check of Radnor, Pa., and Prickett, Jones & Elliott, of Wilmington, Del., will get paid about $35,000 per hour of work on the case, according to Reuters.

The firms had requested $428.2 million in fees. The defense attorneys argued for fees of less than $14 million.

The award ranks among the largest in securities litigation, and according to Reuters is believed to be the largest ever by the Chancery Court, which is a high-traffic area for commercial litigation.

I'm confident Strine ruled on the merits, but I'm also confident there are a lot of folks in Delaware who are happily expecting this decision to encourage plaintiffs to come back to Delaware. As Jonathan Macey and Geoffrey Miller have explained:

The members of the Delaware Supreme Court are drawn predominantly from firms that represent corporations registered in Delaware. The bar and the judiciary are tied together through an intricate web of personal and professional contacts. Unlike Professor Cary, we do not suppose that Delaware judges consciously formulate legal rules designed to increase revenues for their former colleagues. We doubt that they have such cynical motives. Yet, it is unsurprising that Delaware judges believe strongly in the efficacy of the Delaware legal system or that such judges often agree with the legislature that firms will be better off if Delaware corporate lawyers play an active role in their affairs. In other words, in Delaware well-intentioned judges can be expected to devise legal rules requiring that Delaware lawyers be consulted when important decisions are to be made. Moreover, if Delaware judges believe that the state judicial system well serves Delaware corporations, they will be more likely to approve rules that stimulate litigation in the Delaware courts.

To put it another way, Francis Pileggi noted of this case that "Someone got an early Christmas gift." But maybe it was the Delaware bench and bar that did so too.

Update: Alison Frankel discusses the case and the fee calculation at some length, before noting that:

Strine's ruling comes with a very particular context. Delaware, according to some recent academic research, has been losing cases to other venues because plaintiffs' lawyers perceive the Chancery Court as an unfriendly jurisdiction. Strine lashed out at ... lawyers who file cases against Delaware corporations outside of Delaware of engaging in "forum shopping of the rankest kind." He particularly called out Stuart Grant of Grant & Eisenhofer, who criticized the Chancery Court despite receiving his own handsome fees. "Delaware is open for business," Strine said at the November conference, repeating one of his favorite catchphrases.

Monday's hearing on the Southern Peru fee request made it clear that the chancellor wants a certain kind of (legal) business to remain in Delaware. .... If lawyers are willing to litigate big cases through discovery and trial, he suggested, Delaware will make sure they're well compensated for their efforts.